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In this note, we introduce how to use Volatility Index (VIX) for postprocessing quantitative strategies so as to increase the Sharpe ratio and reduce trading risks. The signal from this procedure is an indicator of trading or not on a daily…
We present a study on portfolio investments in financial applications. We describe a general modeling and simulation framework and study the impact on the use of different metrics to measure the correlation among assets. In particular,…
Cross-validation (CV) is a technique for evaluating the ability of statistical models/learning systems based on a given data set. Despite its wide applicability, the rather heavy computational cost can prevent its use as the system size…
This paper studies a general L\'evy process model of the bail-out optimal dividend problem with an exponential time horizon, and further extends it to the regime-switching model. We first show the optimality of a double barrier strategy in…
This paper presents the experimental process and results of SVM, Gradient Boosting, and an Attention-GRU Hybrid model in predicting the Implied Volatility of rolled-over five-year spread contracts of credit default swaps (CDS) on European…
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all…
We propose a unifying framework for the pricing of debt securities under general time-inhomogeneous short-rate diffusion processes. The pricing of bonds, bond options, callable/putable bonds, and convertible bonds (CBs) is covered. Using…
We introduce a neural network approach for assessing the risk of a portfolio of assets and liabilities over a given time period. This requires a conditional valuation of the portfolio given the state of the world at a later time, a problem…
This paper introduces Concurrent Valuation Algebras (CVAs), a novel extension of ordered valuation algebras (OVAs). CVAs include two combine operators representing parallel and sequential products, adhering to a weak exchange law. This…
We consider the class of affine LIBOR models with multiple curves, which is an analytically tractable class of discrete tenor models that easily accommodates positive or negative interest rates and positive spreads. By introducing an…
We consider a trading marketplace that is populated by traders with diverse trading strategies and objectives. The marketplace allows the suppliers to list their goods and facilitates matching between buyers and sellers. In return, such a…
We consider a financial contract that delivers a single cash flow given by the terminal value of a cumulative gains process. The problem of modelling and pricing such an asset and associated derivatives is important, for example, in the…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
The paper presents two new approaches to modeling the interaction of small and medium pricetaking traders with a stock exchange. In the framework of these approaches, the traders can form and manage their portfolios of financial instruments…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
We develop a systemic risk framework to explore cascading systemic failures in networked control systems. A time-delayed version of the vehicle platooning problem is used as a benchmark to study the interplay among network connectivity,…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
The Constant Elasticity of Variance (CEV) model is mathematically presented and then used in a Credit-Equity hybrid framework. Next, we propose extensions to the CEV model with default: firstly by adding a stochastic volatility diffusion…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
State estimation plays a key role in the transition from the passive to the active operation of distribution systems, as it allows to monitor these networks and, successively, to perform control actions. However, designing state estimators…